Full Judgment
used for producing or processing of any goods or for bringing or processing of any goods or for bringing about any change in any substance in or in relation to the manufacture of final products, are ineligible for MODVAT credit under the exclusion clause of Explanation to Rule 57A. Foundary Flux, IRL Mix, Refractories, Ramming Mass, Castable Powder and Mortar etc. are used as part of the furnace. Therefore, will not the Foundary flux IRL, Refractories, Ramming Mass, Castable Powder and Mortar be covered in the excluded category of items under Explanation to Rule 57A? 2. The terms Machine, machinery plant etc. have been used in the exclusion clause (1) to rule 57A in a general sense. If their constituents are taken as inclusive inputs when the plant or machine are not, will not the exclusion become superfluous and meaningless?" 3. The Counsel appearing on behalf of the M/s. Steel Stripes and Alloys Ltd. submits that the Hon'ble Karnataka High Court in the case of Escorts Ltd. Vs. Collector of Central Excise Bangalore, reported in 2000 (120) E.L.T. 75 (Kar.) held that Ramming mass is entitled for the benefit of MODVAT credit as input. Learned Counsel also submits that the Tribunal in the respondents own case reported in 2001 (43) RLT 824 (CEGAT-Del.) already rejected the request of the Revenue in respect of the same question of law.
4. Where the Ramming mass is entitled for the benefit of MODVAT credit as input is settled by the Hon'ble Karnataka High Court in the above said decision (Supra). The Hon'ble High Court held as under: "We have considered over the matter. From the perusal of the provisions of Rule 57A if can be said that it is not only input of those goods which are used as mesh form which final product is made.
But input of those items which are in relation to the manufacture of the final product is also eligible for Modvat benefit. The rule making authority have used two phrases:- (1) goods used in relation to the manufacture. If either of these items have been used from which final product is the resultant then he relation to" is further clear from the explanation which has been given where it is mentioned that for the purpose of this rule inputs goods which are manufactured and used within the factory of production or in relation to the manufacture of final product. The word used refers to other items from which the manufacturing process is carried on and is in the aid of the word "in relation to the manufacture of final product". The exclusion is only of the 5 items which are mentioned therein. Machines, machinery, plant equipment, apparatus, tols, appliances or capital goods user for producing or processing of any goods or bringing about any change in any substance in or in relation to the manufacture of final product have been excluded.
Whenever the exclusion clause is to be restricted only to the word used therein. Rule 57A will include even the items which are used in the manufacture of the product. The world 'in relation to' therefore, has to be given wider meaning. The two items for which we have to consider as to whether they are eligible for the Modvat credit have been explained by the assessee as under: Fibre Glass filter mesh is primarily used to remove the oxide inclusions from the molten alloy melts. Unless this is done the inclusions would not get into the casting and render it unutilisable.
The filter mesh has a resin coating. This resin becomes a part of the finished product. During piston blank casting manufacture, the aluminium alloy enters the outer mould through the filter mesh.
The size of the mesh opening is designed in such a way that it permits filtering of the inclusions while at the same time ensuring that the optimum rate of filling of the mould is not affected. After the casting is solidified and is taken out, the fittling operations are carried out. The filter mesh used remains as a part of the runner and riser which is remelted. Thus the filter mesh becomes a molten metal charge which is used for making final product.
It is a high alumina refractory mass used for lining Induction Furnaces for melting and alloying of aluminium which is for manufacture of pistons. This ramming mass which comes in the form of power is mixed with water, rammed and sintered in Introduction Furnace to provide an insulative and workable crucible surface. this material is being imported presently because of non-availability of equivalent indigenous material.
From the evidence which has come on record it is clear that the items are chemical and resin and therefore cannot be considered to be the items falling under clause (b) (1) of the Explanation to rule 57A. In these circumstances we are of the view that the Tribunal was not right in law in holding that the applicant are not eligible to MODVAT credit in respect of Ramming Mass, Fibre Glass and filter mesh used in or in relation to the manufacture of pistons of the ground that they are covered under Proviso to Rule 57A of the Central Excise Rules, 1944." 5. In view of the fact that question of law now framed by the Revenue is already answered by the Hon'ble High Court. The present application is rejected.